dpGlobal stock futures moved sharply lower early Wednesday after U.S. President Donald Trump told the NATO summit in Turkey that the ceasefire with Iran is “over”, amid renewed hostilities in the Middle East.
Futures on the Dow Jones Industrial Average were down 351 points, or 0.67% by 4:30 a.m. E.T. shortly after Trump’s comments in Ankara, extending declines seen overnight. Futures tied to the S&P 500 were 0.44% lower and the Nasdaq 100 futures were 0.54% lower.
In Europe, the Stoxx 600 dropped 1.46%, with all major regional bourses and sectors, except oil and gas, sliding into the red.
The U.S. started a “series of powerful strikes” against Iran on Tuesday evening, retaliating for attacks against three commercial vessels traveling in the Strait of Hormuz, U.S. Central Command said. Earlier, the Treasury Department revoked a license that permitted Iran to sell its oil around the world in light of the attacks in the Hormuz Strait.
In a statement on Wednesday, Iran’s foreign ministry labeled the strikes a “gross violation of the Memorandum of Understanding” Washington and Iran reached last month to bring their war to an end.
“The powerful armed forces of the Islamic Republic of Iran, as they have repeatedly shown, will not hesitate to defend Iran’s territorial integrity, national sovereignty, and national security against American military aggression,” the ministry said, according to a Google translation.
Speaking to reporters at the NATO summit in Ankara, Turkey, on Wednesday, the military alliance’s Secretary General Mark Rutte said America’s strikes were “absolutely necessary.”
“When you have a ceasefire and Iran is basically violating the ceasefire — we see what happened yesterday with ships being attacked — I think it is totally crucial that the U.S. forcefully reacts,” he said.
West Texas Intermediate futures for August delivery jumped 5.38% to $74.31 per barrel following Trump’s comments. Futures for International benchmark Brent crude for September delivery jumped 5.31% to $78.10 per barrel.
Asia-Pacific markets mostly fell Wednesday. Japan’s benchmark Nikkei 225 closed 2.11% lower, while the Topix declined 1.37%. South Korea’s Kospi fell 5.35% and entered a bear market. Hong Kong’s Hang Seng Index extended early gains to rise 3.18% Wednesday, while mainland China’s CSI 300 was down 0.27% in choppy trade.
European stocks also traded in negative territory, with the regional Stoxx 600 last seen 0.7% lower. Most sectors in Europe posted declines in morning trading, with oil and gas stocks bucking the trend to gain 1.3% amid rising oil prices.
“Renewed tensions in the Middle East have interrupted what had become an increasingly complacent market narrative, prompting investors to reassess geopolitical risks after several weeks of pricing in a smooth path toward de-escalation,” Daniela Hathorn, senior market analyst at Capital.com, said in a note on Wednesday morning.
“The latest attacks have reminded investors that while a ceasefire remains in place, a lasting agreement between the U.S. and Iran is far from guaranteed. Markets had become comfortable with the idea that the conflict would gradually fade into the background but recent developments suggest that assumption may have been premature.”
In Tuesday’s regular session in the U.S., investors rotated out of artificial intelligence-linked stocks while rising oil prices weighed on sentiment. The 30-stock Dow fell more than 100 points after earlier touching a fresh intraday record. The S&P 500 slipped 0.5%, while the Nasdaq Composite dropped 1.2% as chipmakers led the declines.
Investors’ attention will also turn to the minutes from the Federal Open Market Committee’s June meeting, due at 2 p.m. ET Wednesday. The release is expected to provide more insight into Federal Reserve Chairman Kevin Warsh’s first policy meeting, where officials left interest rates unchanged while signaling that additional rate hikes could be warranted if inflation pressures persist.
“The FOMC minutes will be [a] wildcard simply because Warsh was so opaque at the most recent press conference,” Adam Crisafulli, founder of Vital Knowledge, said in a note. “Normally, [Jerome] Powell provided fairly comprehensive accounting of the meeting discussion, but that didn’t happen with Warsh, so the minutes, which are likely to be hawkish in tone, could contain some surprises.”
— CNBC’s Garrett Downs contributed reporting.
